Tag Archives: China Shipping

Ports for Sale– China Buys

 

Piraeus Container Terminal (PCT) built by China in Greece 2009

The old port of Colombo, Sri Lanka took centuries to reach its present capacity. China will have almost doubled it in under 30 months. Operated at full capacity, it would make Colombo one of the world’s 20 biggest container ports.  In the eyes of some Indians, Colombo is part of a “string of pearls”—an American-coined phrase that suggests the deliberate construction of a network of Chinese built, owned or influenced ports that could threaten India. These include a facility in Gwadar and a port in Karachi (both in Pakistan); a container facility in Chittagong (Bangladesh); and ports in Myanmar.

Is this string theory convincing? Even if the policy exists, it might not work. Were China able to somehow turn ports into naval bases, it might struggle to keep control of a series of Gibraltars so far from home. And host countries have mood swings. Since Myanmar opened up in 2012, China’s influence there has decreased. China love-bombed the Seychelles and Mauritius with presidential visits in 2007 and 2009 respectively. But since then India has successfully buttered up these island states and reasserted its role in the Maldives. Besides, China’s main motive may be commerce. C. Raja Mohan, the author of “Samudra Manthan”, a book on Sino-Indian rivalry in the Indian and Pacific Oceans, argues that China’s port bases partly reflect a desire to get easier sea access for trade to and from west China.

State-owned firms are in charge of most of China’s maritime activity, and their motives are at least partly commercial…China’s maritime interests already reflect its status as the world’s largest exporter and second-largest importer. Many of the world’s biggest container ports are in China. It controls a fifth of the world’s container fleet mainly through giant state-owned lines. By weight, 41% of ships built in 2012 were made in China.

The next step is to own and run ports. Hutchison Whampoa, a buccaneering, privately owned Hong Kong conglomerate, has long had a global network of ports. The pioneer among mainland firms was Cosco Pacific, an affiliate of state-owned Cosco, China’s biggest shipping line. In 2003-07 it took minority stakes in terminals in Antwerp, Suez and Singapore. In 2009 it took charge of half of Piraeus Port in Greece. It has invested about $1 billion abroad. China Merchants Holdings International, a newcomer, has spent double that. It invested in Nigeria, as well as Colombo, in 2010. Last year it took stakes in ports in Togo and Djibouti. In January it bought 49% of Terminal Link, a global portfolio of terminals run by CMA CGM, an indebted French container line.

The pace is quickening. In March another firm, China Shipping Terminal, bought a stake in a terminal in Zeebrugge in Belgium. On May 30th China Merchants struck a multi-billion deal to create a port in Tanzania. Even the more cautious Cosco Pacific is thinking about deals in South-East Asia and investing more in Greece.

China Shipping Terminal has small stakes in facilities in Seattle and Los Angeles, according to Drewry, a consultancy. But the experience of Dubai’s DP World suggests that America would not roll out a red carpet. In 2006 DP abandoned plans to buy American ports after a political backlash. Some Americans worry that China wants to take over the Panama canal.

Chinese firms may also subscribe to a supersized vision of the industry in which an elite group of ports caters to a new generation of mega-vessels. These will be more fuel-efficient and link Asia and Europe (they can just squeeze through the Suez Canal). After a decade of hype these behemoths are now afloat. In May CMA CGM received the Jules Verne, the world’s largest container ship. It can handle 16,000 containers and has a 16-metre (52-feet) draft. In July Maersk, a Danish line, will launch an 18,000-container monster. It has ordered 20 from Daewoo, in Korea. China Shipping Container Lines, the country’s second biggest firm, has just ordered five 18,400-container vessels from Hyundai.  Some ports may struggle to cater to these ships. Some of China’s new terminals may try to exploit that. Cosco Pacific is building a dock at Piraeus that can handle mega-ships. Colombo is deep enough for ships with an 18-metre draft. Its cranes can cope with ships 24 containers wide. Nothing in India compares with that…

After political tensions in the South China Sea, China Merchants has withdrawn from a port project in Vietnam. But Cosco’s Piraeus investment, once controversial, is a success, with profits rising and the firm winning plaudits for investing and creating jobs for Greeks.

China’s port strategy is mainly motivated by commercial impulses. It is natural that a country of its clout has a global shipping and ports industry. But it could become a flashpoint for diplomatic tensions. That is the pessimistic view. The optimistic one is that the more it invests, the more incentive China has to rub along better with its trading partners. This, not deliberate expansionism, is what the locals are betting on in Colombo.

China’s foreign ports: The new masters and commanders, Economist,  June 8, 2013

The Oil Needy and the Iran Sanctions: China and India

China is considering sovereign guarantees for its ships to enable the world’s second-biggest oil consumer to continue importing Iranian crude after new EU sanctions come into effect in July, the head of China’s shipowners’ association said.  Tough new European Union sanctions aimed at stopping Iran’s oil exports to Europe also ban EU insurers and reinsurers from covering tankers carrying Iranian crude anywhere in the world. Around 90 percent of the world’s tanker insurance is based in the West, so the measures threaten shipments to Iran’s top Asian buyers China, India, Japan and South Korea.

Global crude oil prices have risen nearly 20 percent since October, partly on fears over supply disruptions from Iran.  “(Ship) operators are worried that if the insurance issue cannot be resolved, they will not be able to take orders for shipping Iranian oil any longer,” Zhang Shouguo, secretary general of China Shipowners’ Association, told Reuters in a rare interview with foreign media.  “We have put forward our concern and related government departments are studying the issue.”

Iran, OPEC’s second-largest producer, exports most of its 2.2 million barrels of oil per day to Asia, and major buyers have yet to find a way around pending EU sanctions.  Like China, India and South Korea were also mulling sovereign guarantees for their tankers. Indian shipping firms indicated last week they would continue to transport Iranian oil even if limited insurance cover exposed them financially to a spill or accident.  Chinese insurers and shipowners would not take the risk on themselves and government intervention was necessary, Zhang said. Major ship insurer, China P&I club, told Reuters earlier this month it would not provide replacement cover for domestic tankers carrying Iranian oil.  Most of China’s tanker fleet, owned by firms such as China Shipping, COSCO Group and Nanjing Tankers, were covered by European insurers, analysts said.

Several government departments were considering the industry’s request, including the Ministry of Finance, China Insurance Regulatory Commission, Ministry of Transport and National Development and Reform Commission (NDRC), Zhang said. He did not say when a decision might be made.  Until recently, China was Iran’s top customer, taking more than 20 percent of its crude exports but customs data last week showed China halved its Iranian crude imports in March compared with the same month in 2011.

Excerpt, Alison Leung, China mulls guarantees for ships carrying Iran oil, Reuters, April 30, 2012